GAAP diluted earnings per share of $0.31 increased 11% from $0.28 per
share in the fourth quarter of fiscal 2015.

Adjusted diluted earnings per share1 was $0.38 vs. $0.32
per share reported in the fourth quarter of last year.

GAAP net income was $3.7 million compared to $3.3 million in the prior
year period.

Adjusted EBITDA2 of $11.7 million increased 16% from $10.1
million in the fourth quarter of fiscal 2015.

2016 Fiscal Year Financial Highlights

GAAP diluted earnings per share was $1.57 vs. $1.03 in fiscal 2015.

Adjusted diluted earnings per share3 was $1.61 vs. $1.21
per share in the prior year.

GAAP net income of $18.7 million increased 54% from the prior year.

Adjusted EBITDA4 of $45.4 million increased 22% from $37.1
million last year.

Long-term debt balance at year-end was $35.8 million, compared to $53
million at the close of fiscal 2015. During fiscal 2016, the company
reduced debt by $20 million and borrowed $2.8 million to acquire
Nagase FineChem (NFC).

Chris Fraser, KMG chairman and chief executive officer, said, “Fiscal
2016 was a very successful year for KMG. We took significant steps
toward building an even stronger company by achieving sustainable
efficiency improvements and advancing our growth strategy in Asia with
the acquisition of NFC. We generated 54% growth in net income to a
record $18.7 million and 22% growth in adjusted EBITDA to a record $45.4
million. Additionally, operating cash flow more than doubled to $41
million, representing an all-time high for KMG.

“Despite a decline in global silicon wafer shipments, fiscal 2016 sales
in our electronic chemicals segment grew modestly from the prior year,
excluding a $6 million foreign currency translation impact from the
strengthening of the U.S. dollar. Segment operating income increased
nearly 50% for the year to a record $32.1 million, driven by higher
product sales and our expanded global presence. We also benefited from
continuing manufacturing efficiency and lower distribution costs.

“Our other chemicals segment delivered strong fiscal 2016 results as
well, reporting a 45% year-over-year improvement in operating income,
aided by a positive contribution from the industrial lubricants business
and improved costs.”

Mr. Fraser continued, “I’m pleased with our 21% year-over-year growth in
fourth quarter operating income to $7.1 million, which was fueled in
part by continued efficiency enhancements and lower distribution costs.
However, our effective tax rate in the fourth quarter was impacted by
certain discrete items that raised our tax rate in the period to 42.6%,
limiting the growth in earnings per share in the quarter.”

Mr. Fraser concluded, “Currently we are experiencing a pickup in demand
from several key semiconductor customers, reflecting improving global PC
demand and continued strength in the Internet-of-Things and automotive
end markets. For the fiscal 2017 year we project consolidated adjusted
EBITDA of $47-49 million, driven by higher sales in both our Electronic
Chemicals and Other Chemicals segments as well as our continued focus on
enhancing efficiency.”

Consolidated results

Fourth Quarter

Dollars in thousands, except EPS

Fiscal 2016

Fiscal 2015

As Reported

Adjusted

As Reported

Adjusted

(GAAP)

(non-GAAP)5

(GAAP)

(non-GAAP)6

Net sales

$

75,301

$

75,301

$

75,993

$

75,993

Operating income

7,085

7,849

5,842

6,506

Operating margin

9.4

%

10.4

%

7.7

%

8.6

%

Net income

3,743

4,483

3,328

3,759

Diluted earnings per share

$

0.31

$

0.38

$

0.28

$

0.32

Full Year

Dollars in thousands, except EPS

Fiscal 2016

Fiscal 2015

As Reported

Adjusted

As Reported

Adjusted

(GAAP)

(non-GAAP)7

(GAAP)

(non-GAAP)8

Net sales

$

297,978

$

297,978

$

320,498

$

320,498

Operating income

27,571

31,218

16,589

24,023

Operating margin

9.3

%

10.5

%

5.2

%

7.5

%

Net income

18,675

19,219

12,138

14,241

Diluted earnings per share

$

1.57

$

1.61

$

1.03

$

1.21

Business segment results

Electronic Chemicals

Fourth Quarter

Fiscal 2016

Fiscal 2015

Dollars in thousands

As Reported

As Reported

(GAAP)

(GAAP)

Net sales

$

66,282

$

66,302

Operating income

8,214

5,452

Operating margin

12.4

%

8.2

%

For the fourth fiscal quarter, the Electronic Chemicals segment reported:

Sales of $66.3 million, unchanged from fourth quarter of fiscal 2015.
Foreign currency translation reduced sales by $450,000 as compared to
the prior year period. Excluding the foreign currency impact, sales
increased 0.7% due to higher revenue in Asia, partially offset by
lower sales volume in North America.

Operating income of $8.2 million vs. $5.5 million in the same period
of fiscal 2015. Operating income and margin improved primarily due to
operating efficiencies and lower distribution costs.

Adjusted EBITDA9 of $11.3 million, compared to $8.4 million
last year.

Electronic Chemicals

Full Year

Fiscal 2016

Fiscal 2015

Dollars in thousands

As Reported

As Reported

(GAAP)

(GAAP)

Net sales

$

261,523

$

265,608

Operating income

32,141

21,787

Operating margin

12.3

%

8.2

%

For the fiscal 2016 year, the Electronic Chemicals segment reported:

Sales of $261.5 million, down 1.5% from the prior year. The strong
U.S. dollar reduced fiscal 2016 sales by $6 million as compared to the
prior year. Excluding the impact of foreign currency, sales increased
1% from the prior year due primarily to product volume growth in North
America and Asia, including the contribution from NFC.

Operating income of $32.1 million, an increase of 48% over the prior
year. Operating income margin improved due to operating efficiencies
and lower distribution costs.

Adjusted EBITDA10 of $43.9 million, compared to $34.0
million in the prior year.

Other Chemicals

As of May 1, 2015, the Other Chemicals segment includes the
pentachlorophenol (“penta”) business and the industrial lubricants
business.

Fourth Quarter

Dollars in thousands

Fiscal 2016

Fiscal 2015

As Reported

As Reported

Adjusted

(GAAP)

(GAAP)

(non-GAAP)

Net sales

9,019

$

9,691

$

9,691

Operating income

3,210

2,279

2,342

Operating margin

35.6

%

23.5

%

24.2

%

For the fourth fiscal quarter, the Other Chemicals segment reported:

Sales of $9.0 million versus $9.7 million in the same period a year
ago, reflecting lower sales of both penta and industrial lubricants.

Operating income of $3.2 million, or 35.6% of sales, compared to $2.3
million, or 23.5% of sales, last year. The increase in operating
income and margin was due to improved costs.

Adjusted EBITDA11 of $3.4 million, up from $2.7 million
last year.

Full Year

Dollars in thousands

Fiscal 2016

Fiscal 2015

As Reported

As Reported

Adjusted

(GAAP)

(GAAP)

(non-GAAP)

Net sales

36,455

$

54,820

$

54,820

Operating income

12,631

8,735

8,798

Operating margin

34.6

%

15.9

%

16.0

%

For the fiscal 2016 year, the Other Chemicals segment reported:

Sales of $36.5 million versus $54.8 million in the same period a year
ago. The decrease in sales was due primarily to the divestiture of the
creosote product line in January 2015, partially offset by the
contribution from the industrial lubricants business.

Operating income of $12.6 million, or 34.6% of sales, compared to $8.7
million, or 15.9% of sales, last year. The increase in operating
income and margin was due to the contribution from the industrial
lubricants business, the absence of creosote sales and improved costs.

Adjusted EBITDA12 of $13.7 million, up from $9.3 million
last year.

Fiscal 2017 Outlook

Sales: Fiscal 2017 consolidated net sales are forecast to be
approximately $300-305 million. This forecast includes a projected
negative foreign currency impact of approximately $4.5 million.

Adjusted EBITDA: We forecast adjusted EBITDA of $47-49 million.
Our fiscal 2017 adjusted EBITDA forecast includes approximately $5
million in stock-based compensation expense and a negative foreign
currency impact of approximately $700,000.

Depreciation and Amortization: Depreciation and amortization
expense is forecast to be approximately $15 million.

Capital Expenditures: Capital expenditures are forecast to be
approximately $20 million, including a portion of our planned capital
investment in Singapore.

With respect to the Company’s full year guidance of Adjusted EBITDA, the
Company is not able to provide a reconciliation of these fiscal 2017
non-GAAP financial measures to the most comparable GAAP measure without
unreasonable efforts; certain items that are included have not yet
occurred and cannot be reasonably predicted, and, accordingly, the
probable significance of such items cannot be determined at this time.
The most comparable GAAP measure and reconciling information that is
unavailable, or not reasonably predictable, would include restructuring
and realignment charges and acquisition and integration-related expenses.

Conference call

Date: Thursday, October 13, 2016

Time: 5:00 p.m. ET

Dial in: 877.789.6981 or 541.797.2420

Participant passcode: 82043840

The conference call will be webcast live via the “Investors” section of
the Company’s website at http://kmgchemicals.com.

If you are unable to listen live, the conference call will be archived
on the KMG website. A telephone replay of the call will also be
available for one week, starting at 8:00 p.m. ET on October 13, 2016. To
access the call, dial 855.859.2056 (domestic) or 404.537.3406
(international) using participant passcode 82043840.

About KMG

KMG Chemicals, Inc., through its subsidiaries, produces and distributes
specialty chemicals to select markets. The Company grows by acquiring
and optimizing stable chemical product lines and businesses with
established production processes. For more information, visit the
Company's website at http://kmgchemicals.com.

The information in this news release includes certain forward-looking
statements that are based upon assumptions that in the future may prove
not to have been accurate and are subject to significant risks and
uncertainties, including statements as to the future performance of the
company. Although the company believes that the expectations reflected
in its forward-looking statements are reasonable, it can give no
assurance that such expectations or any of its forward-looking
statements will prove to be correct. Factors that could cause results to
differ include, but are not limited to, successful performance of
internal plans, product development acceptance, the impact of
competitive services and pricing and general economic risks and
uncertainties.

KMG provides non-GAAP financial information to complement reported GAAP
results. KMG believes that analysis of our financial performance would
be enhanced by an understanding of the factors underlying that
performance and our judgments about the likelihood that particular
factors will repeat. We define adjusted EBITDA as earnings from
operations before interest, taxes, depreciation, amortization,
acquisition and integration expenses, restructuring and realignment
charges and other relevant items.

KMG intends to continue to provide certain non-GAAP financial
information and the appropriate reconciliation to GAAP in its financial
results. As required by SEC rules, the tables below present a
reconciliation of our presented non-GAAP measures to the most directly
comparable GAAP measures. These non-GAAP measures should be viewed as a
supplement to, and not a substitute for, U.S. GAAP measures of
performance.

Table 1

RECONCILIATION OF CONSOLIDATED GAAP NET INCOME TO CONSOLIDATED
ADJUSTED EBITDA

(In thousands)

Fourth Quarter

Twelve Months Ended

Fiscal 2016

July 31, 2016

Consolidated GAAP net income

$

3,743

$

18,675

Add back (deduct):

Income taxes

2,780

9,555

Gain on purchase of NFC

243

(1,826

)

Interest expense

194

799

Depreciation and amortization*

3,927

14,829

Acquisition & integration expenses

102

335

Restructuring charges

231

1,464

Corporate relocation expense

431

1,553

Consolidated adjusted EBITDA

$

11,651

$

45,384

*Includes depreciation related to restructuring and realignment
included in non-cash restructuring and

realignment charges on the statement of cash flows.

Fourth Quarter

Twelve Months Ended

Fiscal 2015

July 31, 2015

Consolidated GAAP net income

$

3,328

$

12,138

Add back (deduct):

Income taxes

2,207

6,746

Other non-operating expense

-

1,250

Loss (gain) on sale of creosote distribution business

-

(5,448

)

Interest expense

309

1,407

Depreciation and amortization*

3,580

19,171

Acquisition & integration expenses

89

530

Restructuring & realignment charges

575

1,264

Consolidated EBITDA

$

10,088

$

37,058

*Includes depreciation related to restructuring and realignment
included in non-cash restructuring and

realignment charges on the statement of cash flows.

Table 1A

RECONCILIATION OF OPERATING INCOME TO ADJUSTED EBITDA

(In thousands)

Note that we do not allocate certain financial statement line
items below operating income

to our segments; as such, the reconciliations below only reflect
the reconciliation of our

operating income by segment to our non-GAAP measures.

Fourth Quarter Fiscal 2016

Electronic

Other

Chemicals

Chemicals

Corporate

Total

Operating Income (Loss)

$

8,214

$

3,210

($4,339

)

$

7,085

Other income (expense)

(45

)

(45

)

(35

)

(125

)

Depreciation and amortization

3,170

282

475

3,927

Acquisition & integration expenses

-

-

102

102

Restructuring charges*

-

-

231

231

Corporate relocation expense

-

-

431

431

Adjusted EBITDA

11,339

3,447

(3,135

)

11,651

Corporate allocation

2,558

799

(3,357

)

-

Adjusted EBITDA excl. corporate allocation

$

13,897

$

4,246

($6,492

)

$

11,651

* Excludes depreciation

Twelve Months Ended July 31, 2016

Electronic

Other

Chemicals

Chemicals

Corporate

Total

Operating Income (Loss)

$

32,141

$

12,631

($17,201

)

$

27,571

Other income (expense)

(118

)

(120

)

(130

)

(368

)

Depreciation and amortization

11,830

1,150

1,849

14,829

Acquisition & integration expenses

-

-

335

335

Restructuring & realignment charges*

-

-

1,464

1,464

Corporate relocation expense

-

-

1,553

1,553

Adjusted EBITDA

43,853

13,661

(12,130

)

45,384

Corporate allocation

10,337

3,371

(13,708

)

-

Adjusted EBITDA excl. corporate allocation

$

54,190

$

17,032

($25,838

)

$

45,384

* Excludes depreciation

Fourth Quarter Fiscal 2015

Electronic

Other

Chemicals

Chemicals

Corporate

Total

Operating Income (Loss)

$

5,452

$

2,279

($1,889

)

$

5,842

Other income (expense)

-

-

2

2

Depreciation and amortization

2,946

340

294

3,580

Acquisition & integration expenses

-

63

26

89

Restructuring & realignment charges*

-

-

575

575

Adjusted EBITDA

8,398

2,682

(992

)

10,088

Corporate allocation

3,588

1,367

(4,955

)

-

Adjusted EBITDA excl. corporate allocation

$

11,986

$

4,049

($5,947

)

$

10,088

* Excludes depreciation

Twelve Months Ended July 31, 2015

Electronic

Other

Chemicals

Chemicals

Corporate

Total

Operating Income (Loss)

$

21,787

$

8,735

($13,933

)

$

16,589

Other income (expense)

(76

)

(90

)

(330

)

(496

)

Depreciation and amortization

12,257

626

6,288

19,171

Acquisition & integration expenses

-

63

467

530

Restructuring & realignment charges*

-

-

1,264

1,264

Adjusted EBITDA

33,968

9,334

(6,244

)

37,058

Corporate allocation

10,780

4,071

(14,851

)

-

Adjusted EBITDA excl. corporate allocation

$

44,748

$

13,405

($21,095

)

$

37,058

* Excludes depreciation

Table 2

RECONCILIATION OF NET INCOME TO ADJUSTED NET INCOME AND

ADJUSTED DILUTED EARNINGS PER SHARE

(in thousands)

Three Months Ended

Twelve Months Ended

July 31,

July 31,

2016

2015

2016

2015

Net income

$

3,743

$

3,328

$

18,675

$

12,138

Items impacting pre-tax income:

Restructuring & realignment charges

231

575

1,759

6,904

Acquisition & integration expenses

102

89

335

530

Corporate relocation expense

431

-

1,553

-

Gain on purchase of NFC

243

-

(1,826

)

-

Loss (gain) on sale of creosote business

-

-

-

(5,448

)

Environmental site cleanup reserve

-

-

-

1,250

Income taxes*

(267

)

(233

)

(1,277

)

(1,133

)

Adjusted net income

$

4,483

$

3,759

$

19,219

$

14,241

Adjusted diluted earnings per share

$

0.38

$

0.32

$

1.61

$

1.21

Weighted average diluted shares outstanding

11,937

11,845

11,926

11,779

*Represents the aggregate tax-effect of the items impacting
pre-tax income utilizing a tax rate of 35%,

except for the gain on the purchase of NFC, which is not a
recognized gain for tax purposes.